Bond Issue: ‘Corporate Welfare’ or
Jobmaker?Three-part proposal also involves local road, water
projects

Jim Siegel and Mark Niquette

Columbus Dispatch

Through Friday, The Dispatch will publish
stories about the five proposed constitutional amendments facing Ohio
voters on Nov. 8.

Today, the focus is on Issue 1, a $2 billion
bond package that supporters say will bring hightech jobs to Ohio.

Talk to Issue 1 supporters, and they’ll
quickly tell you the $2 billion proposal boils down to one word — jobs.

Ohio’s stuck-in-the-mud economy isn’t
creating nearly enough of them. No longer able to rely on highpaying
manufacturing jobs to boost the standard of living, state leaders say
government must do more to develop hightech employment.

And though some conservatives term it
corporate welfare, supporters
say it’s vital that Ohioans let state government spend another $500
million for the Third Frontier program.

The program is designed to develop high-tech
research, and eventually high-tech jobs, by assisting companies and
fostering partnerships with universities and businesses.

"There is a gap between our outstanding,
world-class research
institutions and our ability to commercialize some of that research into
new products in our state," said Lt. Gov. Bruce Johnson. "With some state
assistance we can pool a lot of the research that’s already happening and
have it create jobs in Ohio."

Issue 1, which increases state borrowing but
does not raise taxes, is a three-part, $2 billion issue that also
includes:

• $1.35 billion for local road, bridge and water projects, essentially
continuing a 10-year issue that was last approved in 1995. The issue is
not set to expire until after 2006.

By itself, the issue passed by wide margins
in 1987 and 1995. It is
strongly supported by local government officials who have relied on the
money for more than 10,000 projects.

"For us, it’s essential," said John Mahoney,
deputy director of the Ohio Municipal League. "That has been the most
successful state program we’ve had as far as infrastructure investment."

• $150 million over seven years for business-site development, such as
industrial parks. Money can be used for land and building acquisition,
renovations and the installation of utilities.

Much of the discussion of Issue 1 has
focused on the Third Frontier
portion of the proposal.

Introduced by Gov. Bob Taft in 2002, his
initial plan called for
spending $1.6 billion over 10 years. The bulk, $1.1 billion, is coming
from tax revenue, capital budget funds, tobacco-settlement money and a
loan fund fueled by state liquor profits.

The final portion of the plan — a $500
million bond issue to be approved by voters — went down to a stunning
defeat in November
2003.

The issue is back because, state leaders
say, $1.1 billion is not enough.

Johnson said the demand is 10 times what the
state currently is spending — and other states, such as California, are
spending significantly more.

"We’re significantly over-invested in
capital because of the nature of
the money we’re spending," Johnson said. "You have to fill up (the
buildings) with active people who are doing the research."

The state has awarded $325 million since
2002.

Nearly $89 million has gone to projects at
the Ohio State University,
helping to fund research such as lung-cancer treatment and industrial
components made from agricultural products.

"If we did not carry these innovations
forward, they undoubtedly would be developed in other states or the world
market," said Robert
McGrath, vice president for research at Ohio State.

Ohio State, with help from $17 million in
Third Frontier funds, partnered with Phillips Medical in Cleveland to
develop a magnetic imaging system that can take pictures of the brain far
more enhanced than current equipment.

The machines are being built in Cleveland,
where 80 jobs have been
created, McGrath said. Installing the new machinery at the Ohio State
Medical Center also required the purchase of $200,000 in concrete and
$800,000 in steel from Ohio companies.

"That’s the kind of spillover we’d like to
have," McGrath said. "We
think we have numerous programs heading in that direction."

But Third Frontier critics argue the state
should not be increasing state borrowing for what they term "corporate
welfare" with no guarantee of new jobs.

There are moral concerns as well. Some
conservative groups say Issue 1 funds could be used for embryonic
stem-cell research.

Rep. Tom Brinkman Jr., R-Cincinnati, argues
that government just isn’t very good at investing in private companies —
and that taxpayers often end up subsidizing projects that private
investors won’t touch.

"Government is a sap, a sucker," Brinkman
said.

Kurt Kauffman, the state’s debt manager at
the Office of Budget and
Management, said credit-rating agencies don’t have a problem with the
additional borrowing.

In all, Issue 1 would require the state to
pay $2 billion in principal on
the bonds and $1.2 billion in interest, Kauffman said.

Although voters might support Issue 1
because of the state’s declining economy, they need to do so with their
eyes open, said Jon Honeck, a research analyst for Policy Matters Ohio, a
nonprofit public policy group in Cleveland.

Issue 1, he said, would change the
relationship between the public and private sectors by allowing government
to become stockholders in private companies, reversing a longstanding
constitutional prohibition.

Policy Matters said Issue 1 is an
improvement over the 2003 ballot
issue because there are more safeguards to require accountability of
funding and ensure all regions in the state benefit.

Success of the program, Honeck said, "will
depend on the vigilance of
the legislature and the appropriate state agencies in defining and
tracking the public interest in economic-development policy."

Policy Matters Ohio is a non-profit policy
research organization founded in January 2000 to broaden the debate about
economic policy in Ohio. Our mission is to conduct high-quality research
promoting decisions which benefit our whole community. Given the challenges of a
rapidly-changing economic system, rising wage inequality, new issues in
education and changes in the way work is organized, it is imperative that Ohio
workers have a voice in the economic debate.

Policy Matters provides real-world analysis
focused on issues that matter to low- and middle-income workers in Ohio. Our
findings are accessible to the public, the media, and policy makers. We hope to
strengthen democracy by providing Ohio's citizens with the essential tools to
participate in the public discussion on the economy. We believe this will result
in economic policies that better reflect the public interest.